August 2014 AIM Prospector

AIMprospector

write-ups on five AIM-quoted companies

Profits, history and dividendsThe AIM company Warren Buffett would love

Issue 6 August 2014

recent IPO offering big dividends

fast-growing financial firm with great prospects

in-demand IT provider

free to private investors

Supported by

one of AIM’s best recovery stocks

http://www.stockopedia.com/offers/blackthorn50/

AIMprospector

2 www.aimprospector.co.uk

Welcome to AIMprospector, the online magazine covering five AIM-quoted companies every month.If you are reading this on issuu.com then you are late. AIM Prospector is sent as a pdf to registered subscribers at least 24 hours before it goes public. If

you have not already signed up, you may do so free at www.aimprospector.co.uk. After featuring fashion manufacturer Boohoo.com in the June edition at 50p, I

reported that I was shorting shares in the company using Spreadex. I closed my

short in the middle of this month at 39p. I hope that any readers that followed my

trade have also made a handsome profit. The shares have since ticked up but along

with the fears I previously voiced on valuation, I would now add my concerns over

the effect that a stronger pound may have on the company’s profits.

Currently, I retain exposure to only one AIM company, the insolvency

practitioner Begbies Traynor. I have been a shareholder in the company since the

shares were priced in the mid-30s and continue to regard the company as one

of the very best quoted plays on the inevitable interest rate increases. The shares

have rallied recently and I think that they have further to go. It is worth noting that

before the financial crisis, when interest rates were much higher, Begbies Traynor

was making more than twice as much as it announced for the year to April 2014.

To the pages of AIM Prospector this month I welcome Mr Adam Hart. For this

edition and the next, Adam has kindly agreed to write the Executive Insight piece.

This new feature is a page of advice and perspective from an experienced operator

in the AIM market. Adam is a former chairman of the London Stock Exchange’s

AIM Advisory Group. He is today a corporate financier with London Bridge Capital,

helping growing companies to raise finance through both debt and equity. Adam

will be running through his ‘checklist for AIM companies’ and I hope that any

executive that is reading finds some useful guidance among Adam’s words.

If you feel similarly qualified to write such an article, please get in touch.

Finally, a quick note on Iomart Group. This month’s article, including my

conclusion that the company could be a takeover target,

was written well ahead of the recently announced bid

for the group. Rather than tear the article up, I decided

that it remained a story worthy of coverage.

“Enjoy this month’s AIM Prospector and good luck with your AIM endeavours.”David O’Hara, Editor, AIMprospector

ContentsStockopedia .....................p 3

NAHL .............................p 4

Portmeirion .....................p 5

Executive Insight .................p 7

Iomart .............................p 8

Jarvis Securities ................p9

Plastics Capital ..............p 10

next month ....................p 11

Contacttwitter: @aimprospector

email: [email protected]

www.aimprospector.co.uk

Published by:Blackthorn Focus Limited

www.blackthornfocus.com

cover photo: Bloomberg

AIMprospector

write-ups on five AIM-quoted companies

Profits, history and dividendsThe AIM company Warren Buffett would love

Issue 6 August 2014

recent IPO offering big dividends

fast-growing financial firm with great prospects

in-demand IT provider

free to private investors

Supported by

one of AIM’s best recovery stocks


mailto:[email protected]


www.blackthornfocus.com

AIMprospector

www.aimprospector.co.uk 3

Stockopedia is an online stock filtering and research community. I have been a customer of Stockopedia’s for several years and am happy to be able to tell AIM

Prospector readers about how I use the system to discover investment opportunities.

I described last month how the financial statistics website Stockopedia can be used to identify some of the very most successful companies on AIM.

This month, I have configured two new screens in Stockopedia to return a collection of AIM companies that may present an opportunity.

The first screen searches for all AIM stocks with a market capitalisation greater than £25m that are trading within 7% of their 52-week low. The aim is to quickly find companies that have been sold off sharply and may now represent good value.

This screen yields just 35 companies. A large number of these are operating in the resources sector. On AIM, these firms are typically less mature and harder to value. I often ignore them. From those remaining, I have picked out a few for further consideration.

Majestic Wine shares fell hard after the release of a disappointing trading statement in March. The shares now trade at their lowest price since January 2012. Although I have fears over the long-term trend for alcohol sales in the UK, the likely dividend yield should help prevent further share price falls.

DX Group appears interesting. The logistics firm joined AIM via an IPO in February, reaching a high of 146p before falling back to today’s levels. A recent trading statement confirmed that the company was on course to meet expectations for the year. According to Stockopedia data, the forecast 2015 dividend payout is 6p. This compares favourably with today’s price of 116p.

Of most interest is M&C Saatchi. The company is a marketing services business, just the kind of industry to benefit from a return of business confidence such as the UK is now experiencing. M&C Saatchi has a commendable dividend record. Apart from the three years 2008-2010 when the dividend was held, M&C Saatchi has been increasing its payout every year since 2005. According to Stockopedia’s data, more significant increases are forecast for this year and next.

Five AIM shares trading near a 52-week lowCompany Market

Cap

%vs. 52w

low

P/E Yield (%)

Majestic Wine (MJW) 263 5.5 15 4

DX Group (DX.) 234 2.8 11 1.3

M&C Saatchi (SAA) 162 4.1 16.2 2.4

IQE (IQE) 131 3.9 18.2 0

accesso Technology (ACSO) 95 6.1 26 0

In my second screen, I searched for AIM companies that have been increasing their annual dividend year-on-year for the last five years at an average rate of more than 15% per annum. This returns 24 companies. I have picked out the five that look most interesting in the table.

Financial services firm Brooks Macdonald appeals, especially as its shares have been falling recently, from around 1700p in April to as low as 1380p in the last week of July. That puts one of AIM’s most successful companies on a 2015 P/E of 14.6, with an expected yield of 2.1%.

Gooch & Housego has also caught my eye. The company is a provider of optical laser parts to industry. Turnover at the firm has doubled since 2008 and the dividend is up more than fourfold. Like many AIM companies, shares in the company have fallen recently. With a P/E of 17.8 and 28% earnings growth forecast this year, the valuation is not unreasonable.

Dart Group looks the cheapest of the candidates. However, the company did profit warn with recent full year results, which naturally undermines confidence in any new profit forecasts. That said, the company does have a very respectable five year record. The current low might be an opportunity to pick up the shares cheaply. More research would be vital here, to try and gauge whether recent problems are only temporary or likely to continue depressing profits.

Unless you are planning on running a diverse, mechanical portfolio, a tool such as Stockopedia should never be the sole source of investment decisions. For investors that base their decisions on company fundamentals, it is an invaluable source of facts and investment ideas.

A collection of AIM companies that have increased dividends by at least 15% a year on average in the last five yearsCompany Market

Cap (£m)

DPS 5y

CAGR %

P/E Yield %

Dart (DTG) 307 31.0 8.7 1.3

Staffline (STAF) 269 16.4 34.3 0.6

Brooks Macdonald (BRK) 190 45.1 19.6 1.6

Gooch & Housego (GHH) 149 33.2 25.1 1.1

Cohort (CHRT) 83 19.3 14.0 1.8

AIMprospectorThe annual subscription to Stockopedia is dwarfed by the gains I have made from shares that it has helped me to find and research. If you think that this comprehensive data product could help you, click here for more information.

by David O’Hara, Editor, AIM Prospector

advertisement feature










AIMprospector


NAHL’s campaigns provide a

familiar and easy-to-understand

interface for people with a genuine

claim. Without firms such as NAHL,

there would be fewer people getting

justice. As for the ‘no-win-no-fee’

model, while future regulatory changes

are possible, any acceptable alternative

would likely result in increases to the

government’s legal aid budget. I see

little political appetite for that.

NAHL applies a series of filters to

enquiries before passing the claim

to a local lawyer. NAHL apportions

its marketing bill plus some margin

to its law firm clients. This currently

accounts for 87% of group revenues.

Just over a quarter of NAHL’s enquiries

relate to road traffic accidents

(the most controversial claims

environment), well below the industry

average of more than three quarters.

Other revenue comes from what

NAHL terms ‘products’. This is a

collection of services for client law

firms, outsourcing some of their

processes to NAHL. Revenues from

these additional services have doubled

in the last two years. Management

expects that there is more potential

here, such as insurance (for lawyers,

should a claim fail).

NAHL is the plc behind the National Accident Helpline. The company acts as an aggregated marketer for personal injury lawyers across the UK. NAHL does this through its advertising campaigns, usually fronted by its bandaged mascot ‘Underdog’.There is some unease about this

type of business. NAHL’s activities

are frequently dismissed as part of a

‘claim culture’ or ‘ambulance chasing’.

However, I believe that its core

activities are an essential part of the

UK’s justice ecosystem.

Much of the population is less

familiar with the legal system than the

claims management industry’s critics.

Many people lack the confidence

to approach a solicitor, or may not

realise that they have a legitimate

compensation claim due to an

injury or medical negligence. To a

lot of people, the legal profession is

frequently alien and remote. To the

sort of person typically presenting a

claim to NAHL, their understanding

of the workings of the law may be

limited to its portrayal on television.

Lawyers are typically not common or

familiar to the kind of person most

likely to suffer a workplace injury.

NAHL Group (LON:NAH)

FOR

Dominant market position

Strong dividend forecasts

AGAINST

Unpopular sector

More mature health and safety environment could reduce claims in long term.

Market cap £82m

Bid:offer 200p:207p

P/E (forecast) 9.4

Yield (forecast) 7.2%

52week low:high 190p:214p

NAHL: dividends from claims

people lack the confidence to

approach a solicitor

The marketing cost that would

be required to compete with NAHL,

along with the regulated nature

of its activities, combine to form a

considerable barrier to competition.

NAHL’s proven cash generating ability

and low debts (net debts under £5m on

listing) has led to some tasty dividend

forecasts. I expect NAHL to become

one of AIM’s high yielding stocks.

Given the commonplace worries

about the claims industry, the rating

that the market awards the shares will

likely be held back, until the company

has proved itself. This could be a great

opportunity for investors to secure both

an income stream and capital gains. Half-

year results are due on September 25th.

apportions its marketing bill plus

some margin

a considerable barrier to

competition


AIMprospector TOPpick


TOPpick: Portmeirion: over 250 hundred years of brand heritage Listed since 1988, tableware distributor and manufacturer Portmeirion has leveraged its brands to become one of AIM’s most successful companies. Today the company embodies many of the characteristics so loved by US super-investor Warren Buffett.From its Stoke headquarters,

Portmeirion Group employs 600

people worldwide. The company owns

four brands. ‘Pimpernel’ produces

patterned table accessories such

as placemats, coasters and trays.

The eponymous Portmeirion, in

existence since 1960, is a tableware

and cookware brand. The remaining

and oldest brands in Portmeirion’s

portfolio are ‘Spode’ and ‘Royal

Worcester’, both purchased in 2009.

The two most recent additions bring

the most significant global recognition

and collector interest.

Much has been made of Warren

Buffett’s love of brand-owning

companies. The billionaire investor has

made himself one of the world’s richest

men by earning outsized returns from

his portfolio of investments.

Buffett is a big investor in

healthcare brand portfolio firm Procter

& Gamble. His investment firm also

owns a huge portion of Coca-Cola.

Portmeirion’s brands put them in that

special class of companies with pricing

power and long-term customer appeal.

Portmeirion’s market position and

brand strength mean that of all of the

companies on AIM, I would expect Mr

Buffett to like them most.

Companies with recognised brands

and excellent customer service are

ceteris paribus more likely to make sales.

Their brand strength frequently enables

them to charge higher prices than less

recognised competition. A rival would

have to invest considerably in promotion

and would need decades to establish

the assurance that comes from Spode,

Portmeirion or Royal Worcester.

A strong brand establishes a

particularly virtuous circle for a

manufacturer. Higher volumes

bring economies of scale, delivering

improved margins. Higher profits then

facilitate more investment in both

manufacturing and the brand.

Spode embodies brand strength

and heritage. Founded in 1776, Spode

is one of the world’s best known

tableware brands. The ‘Blue Italian’

pattern is nearly two hundred years

old and remains a strong seller today.

The Group’s best selling pattern,

‘Botanic Garden’ from Portmeirion

is over forty years old. This pattern

alone accounts for 40% of group

sales. Second biggest seller is Spode’s

‘Christmas Tree’ design, which is

particularly popular in North America.

Royal Worcester, whose products are

a staple feature of television antique

shows, has a similar ancient history to

Spode. As befits the name, along with

employs 600 people worldwide

the Portmeirion botanic garden pattern

brand strength frequently enables

them to charge higher prices


AIMprospector TOPpick


the usual tableware ranges, the Group

uses the Royal Worcester brand for

commemorative royal occasions.

Better still, Group sales are spread

across geographies. North America is

Portmeirion Group’s most important

market. Second is the domestic UK

market, contributing around one

third of group sales. The third most

important territory to the Group,

surprisingly, is South Korea, where

sales are similar to the levels enjoyed

in the UK.

Portmeirion Group is more than

just a good theoretical investment.

Its recent corporate performance

demonstrates that it is one of the

most successful of all AIM-quoted

companies. In the last five years,

sales at the company have increased

at an average rate of 12.9% a year.

Earnings per share has doubled since

2009. Dividends at the company have

increased year-on-year since 2008. The

payout has been hiked by an average

of 10.3% a year in that time.

In the last five years, the shares

have progressed in a near-straight line

from 212p to 815p. The maximum

drawdown in that time was just 146p.

Full year results, announced back in

March, showed that this strong trend

remains in place. Group sales increased

5.0% and pre-tax profits were 6.3%

higher at £7.0m. Basic earnings

per share was 12.6% higher. Total

dividends for the year were raised by

10.1%.

It gets better. The year-end balance

sheet showed non-current liabilities

of £2.4m and cash of £6.2m. Current

assets exceeded current liabilities 4:1.

Trade receivables were comfortably

larger than payables. As the return on

assets improved during the year and

actuarial calculations were adjusted,

the Group’s pension scheme deficit

halved. The £3.9m purchase of the

long leasehold of the company’s

Stoke-on-Trent warehouse and

offices completed in July 2013. The

Group had previously been leasing

the building at a cost of £306k per

annum. Management expects that this

investment alone will improve pre-tax

profits by £220k a year.

For this full year, broker consensus

is for Portmeirion to post a 6.0% EPS

increase and a 5.8% dividend hike. At

today’s price, that puts the shares on

a 2014 P/E of 14.5 and an expected

yield of 3.1%. The consensus estimate

is for another 5.0% of EPS growth

in 2015, accompanied by a 5.1%

dividend increase.

On those figures alone, a value

investor would not call Portmeirion

stock cheap. However, the company

is a rare combination of corporate

outperformance, international appeal,

leading brands, scale and financial

strength. These factors make the

company one of the finest long-term

investment prospects on the market

today.

Portmeirion Group (LON:PMP)

FOR

Excellent profit and dividend record

Strong balance sheet

AGAINST

Product is a fashion item

Strong pound may hamper sales

Market cap £86m

Bid:offer 805p:815p

P/E (forecast) 14.5



a staple feature of television

antique shows

more than just a good theoretical

investment

a value investor would not call

Portmeirion stock cheap

a Spode tea caddy in the ‘Blue Italian’ pattern


AIMprospector


It has been some five years since I last

acted as a Nominated Advisor (NOMAD)

to an AIM-quoted company.

My interest and enthusiasm for

the AIM market has not diminished

since. I have been pleased to see the

resurgence in the shares of a large

number of AIM companies yet equally

disappointed that a considerable

number continue to underperform.

Some AIM companies’ boards

probably have a good reason to remain

low key. There are still lots of companies

which are effectively defunct – going

nowhere, only keeping a listing in the

hope of attracting a reverse takeover,

or even because the directors’ personal

pride is served by remaining on the

board of a quoted company. Such

companies should delist and provide

their public shareholders with a fair exit.

For those AIM companies that do

have a business capable of growing and

generating investor returns, here is part

one of my ‘checklist for AIM companies’.

The first is to carefully choose which

professional advisers are retained –

indeed, investors tend to gauge the

quality of a company by the company

that it keeps. Many NOMADs and brokers

are only interested in companies where

they can earn more than the annual

retainer through share placements

and M&A. Such firms tend to be less

interested in the length of their client

list and more in the quality. An active

NOMAD/broker, capable of raising

funds, should be sought by all go-ahead

companies - but even in this regard,

care should be taken. A number of

firms are good at raising funds through

placings, but they are less interested in

serving investors in the aftermarket. AIM

companies should find a NOMAD/broker

who speaks to the right type of investor

– institutions, tax-driven funds or private

clients and, importantly, is able to find a

home or a small parcel of shares that are

bouncing around the market on a Friday

afternoon, destroying the share price.

Although it is not a NOMAD/broker’s

job to be an investor in its clients, should

a company choose one with a market-

making arm, that firm should be more

able to find a home for small parcels of

shares when required.

PR advisers are also very important.

Many PR companies are merely able

to deal with the regulatory events -

putting out results and other required

announcements but providing no

added value. The best PR companies

are able to get a story from a relatively

unknown company into one of the

newspapers or specialist publications.

The effect of this exposure can

transform the share price. Equally, bad

news (and all companies generate this

from time-to-time) can be explained by

PR in a way that does not destroy all of

the hard work hitherto.

The availability of research for

investors has long been an issue for

smaller AIM companies. Not only

should a company’s own broker publish

research on a regular basis, but reports

written by independent houses should

be sought as well. Clever companies

play off different broking houses by

giving them hope that they might, one

day, win them as a client, and thereby

encourage them to write research. In

addition, many companies make use

of one of the ‘paid-for’ research firms.

These should not be underestimated

as they circulate their research far

and wide and can often generate real

interest among potential investors.

Next time I will set out some

thoughts on how an AIM company might

‘play the game’ to secure more investor

interest and a rising share price.

Adam Hart is Chairman of London

Bridge Capital. He enjoyed a long career

as a nominated adviser acting for many

AIM companies and served on the Stock

Exchange’s AIM Advisory Group for over

14 years, spending more than five years

as Chairman.

Executive Insight Executive Insight is a new AIM Prospector feature. Each month, AIMprospector brings a collection of advice and insight targeted at company directors. The first contribution to this series comes from Mr Adam Hart.

Adam H

art, London Bridge Capital

NEW FEATURE


AIMprospector


Iomart made an operating profit of

£1.2m from sales of £18.3m. By 2014,

an operating profit of £11.1m was

reported on those £55.6m of sales.

Iomart does not have a clear run

here. After a slow start, better known

blue-chip firms are now putting a

cloud offering at the front and centre

of their product suite. One example

is Oracle Cloud, a broad solution

offering CRM, human resources,

marketplace and social networking.

Similar solutions exist from IBM and

Microsoft. Amazon web services and

Google’s cloud platform are also

formidable competitors.

The emergence of these well-

financed alternatives perhaps explains

the recent weakness in Iomart’s share

price. The shares have declined from a

high of 317p in September of last year

to 206p recently in June. Shareholders

in FTSE 350 peer Telecity have endured

a similar ride in the last twelve months.

Nevertheless, profit forecasts at

Iomart have been increasing. For

the year ending March 2015, the

consensus analyst estimate today is

for 13.0p of EPS, up from 11.3p this

time a year ago. If Iomart can meet

the current estimate, that would

represent a near 75% improvement on

In the last five years, the company has

dramatically increased its provision

of internet-facilitated ‘cloud’ services.

This strategy has led to soaring profits.

Ten years ago, Iomart was focussed

on the supply of network security

software and web services such as

internet and email to businesses. In

2004, Iomart acquired the domain name

and web hosting service easyspace. As

margins in domain names started to

fall across the industry, Iomart used

easyspace to exploit a nascent industry,

datahosting. It is the evolution of this

type of service that has seen Iomart

grow revenues fast: from £7.4m to

£55.6m in ten years.

As businesses have become

more dependent on internet

communications, issues such as

data storage, access and security

have moved up the agenda. This has

turbocharged demand for Iomart’s

services. Iomart meets this demand

through a network of their own data

centres across the UK. As utility

increases at these sites, Iomart’s

profit margins accelerate. In 2010,

Iomart: profits raining from the cloudGlasgow-based Iomart has reinvented itself to become an internet infrastructure partner for public and private organisations across the UK.

2014. A more moderate 16.8% EPS rise

is forecast for the year after.

With the shares at the level that

they are today, Iomart will have to

deliver the growth that is expected

of it. While the industry has become

more competitive, there will remain a

lucrative niche that Iomart’s blue-chip

competitors will dismiss as too small

to pursue. Iomart could continue to

thrive here, all the while making itself

a more attractive takeover candidate.

Only last week, the company

announced that it had rejected a 285p

bid from Host Europe.

If you are the type of investor

that looks to back successful AIM

companies for the long term, Iomart

looks a decent candidate.

Iomart Group (LON:IOM)

FOR

Successful player in fast-growth market

Takeover candidate

AGAINST

Bigger players growing fast

Offering becoming commoditised

Market cap £276m

Bid:offer 258p:259.5p

P/E (forecast) 19.9



data storage, access and security

have moved up the agenda

network of their own data centres

across the UK

profit forecasts at Iomart have

been increasing


AIMprospector


Quoted on AIM since December 2004,

Jarvis Securities is the parent company

of Jarvis Investment Management

(JIM). Headquartered in Tunbridge

Wells, Kent, JIM provides outsourced

investment administration services

to financial firms and execution only

stockbroking to the public.

Jarvis offers share trading through

its X-O (‘execution only’) website and

Sharedeal Active, a telephone dealing

business. Each is keenly priced. For

businesses such as IFAs, Jarvis offers a

clearing and settlement service ‘Model

B’. The company also administers

savings schemes for Investment Trusts.

Jarvis is run by its Founder and

majority shareholder Andrew Grant.

Mr Grant and his family control

52% of the company’s shares. In a

company with a market capitalisation

of £58m, this will deter some fund

managers, who may fear that it would

be impractical to trade a meaningful

stake in the company.

This should be much less of a worry

to private investors. While Mr Grant

controls enough of the company to

prevent it being taken over, he does

not have enough to force a delisting.

Stay-away fund managers create an

opportunity to buy Jarvis at a lower

price. This discount increases the

yield on the shares, making them an

attractive income and growth play.

In the five years from 2008 to

2013, Jarvis increased revenues from

£4.9m to £7.2m. Post-tax profits in

that period rose from £1.3m to £2.4m.

Dividends have risen from 5p per share

for 2006 to 14.5p for the last full year.

Jarvis has a stated dividend policy

of paying two thirds of post-tax profits

to shareholders in dividends. Given

the nature of its business lines, it is

difficult to imagine how Jarvis could

ever return a loss. The company’s

balance sheet is also reassuring.

Jarvis’ current assets at the year-end

exceeded total liabilities by £3m.

Jarvis commented with its last

results on how the IPO of Royal Mail

led to ‘unprecedented demand for

new accounts’. The eventual sale of

Primarily an online stockbroking operation, Jarvis Securities is a successful dividend-paying AIM company. Recent changes and forthcoming events make the profit outlook extremely favourable.

the government’s stakes in Lloyds

and RBS mean that an even greater

bonanza awaits. Given the private

investor community’s predilection for

trading AIM shares, the lifting of the

ban on AIM shares in ISAs alone would

be expected to have a significantly

positive impact on the 2014 year.

According to the consensus

forecasts available, Jarvis will post

5.1% EPS growth for 2014 and

another 6.2% advance next year. The

dividend is expected to continue rising

in-line with earnings.

Recent half-year numbers showed

a 9.7% increase in EPS and a 23.1%

dividend hike. Existing forecasts appear

to be conservative.

Jarvis Securities: big dividend payer in a booming market

Jarvis Securities (LON:JIM)

FOR

Dividend-focussed firm

Fantastic market opportunities

AGAINST

Thin margins in online business

High valuation

Market cap £59m

Bid:offer 515p:535p

P/E (forecast) 22.1



Mr Grant and his family

control 52%

attractive income

and growth play

significantly positive impact on

the 2014 year


AIMprospector


supplying precision-made matrices to

80 countries around the world.

Finally, contributing just over one

third of revenues, is Plastics Capital’s

high strength film packaging business,

Palagan. Typical end uses of this

division’s products include packaging

for couriers and manufacturers such as

furniture and animal feed producers.

After borrowing heavily to finance

a string of acquisitions in the lead

up to the financial crisis, Plastics

Capital found its shares held back by

depressed trading and large debts. The

high watermark came at the end of

2009 when the company carried £19m

of debt and was delivering £2.0m in

pre-tax profit. At the time of the 2009

full year results, Plastics Capital’s

market capitalisation was just £7.8m.

Since then, management has been

judiciously reducing debt. This has

resulted in lower borrowing rates and

improved cashflows. Plastics Capital

was able to introduce a 1p per share

dividend in 2012. This has since been

increased steadily, reaching 3p for 2014.

Business progress, and the

improved share price rating, has

encouraged management to get back

on the acquisition trail. In March 2014,

Plastics Capital acquired Shengli, a

Chinese manufacturer of creasing

matrices. Before the acquisition,

Shengli had been C&T Matrix’s largest

competitor in China.

Plastics Capital recently announced

what it calls a “major commitment

from a tier one automotive

manufacturer” that will deliver more

than £0.5m of additional annual sales

for BNL, reaching a total of £4.0m over

the life of the contract. Management

expects that more similar projects will

be secured in the next year.

After earning a decent market

rating, Plastics Capital looks well set

to deliver further growth. While the

underlying businesses will always be

vulnerable to any economic downturn,

the existence of a well-covered

dividend should prevent a return to

previous share price lows.

Plastics Capital is a group of four

specialist manufacturing companies.

Bell Plastics manufactures hose

mandrels, lengths of plastic used in the

manufacture of specialist reinforced

hosing or piping. Quality mandrels are

needed to ensure that the tube being

formed is sized precisely. Through

innovation and invention, Dorset-

based Bell has become a market

leader. Bell Plastics contributed 13% of

group sales in the year to March 2014.

BNL is primarily a designer and

manufacturer of plastic bearings to a

wide range of applications. This ranges

from cash machines and photocopiers

to automotive steering columns and

conveyors. This division was responsible

for one third of group sales in 2014.

C&T Matrix manufactures creasing

matrices, the apparatus used in box

manufacture. C&T Matrix accounted

for 18% of plc sales last year. Plastics

Capital claims that C&T Matrix is one

of two world leading manufacturers of

this equipment. C&T Matrix operates

from its base in Wellingborough,

Plastics Capital: a great AIM recovery story

Emerging from the aftermath of the financial crisis, Plastics Capital has been quickly paying down debts and increasing shareholder dividends.

Plastics Capital (LON:PLA)

FOR

New deal points way to more big sales

Debts conquered

AGAINST

Vulnerable to input cost rises

Historically high valuation

Market cap £41m

Bid:offer 131p:137p

P/E (forecast) 10.6

Yield (forecast) 3%


Bell has become a market leader

judiciously reducing debt

more than £0.5m of additional

annual sales


AIMprospector


Next month:AIM Prospector will be bringing readers the lowdown on

another five shares.

Adam Hart will be joining us again to run through his

checklist for AIM companies.

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The tax treatment of AIM-quoted companies remains

extremely favourable. Investors should make AIM a

research priority. AIM Prospector is proud to continue

bringing private investors analysis on these firms.

Next month I may finally get around to writing up the

only AIM company I own shares in: Begbies Traynor.

Otherwise, I simply leave you with the observation that

smallcap markets can suffer significant setbacks in the

holiday season. It is vital to be prepared for this and to

take advantage of any opportunities presented.

AIMprospectordigging for dividends - panning for profits

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Documents

August 2014 AIM Prospector